What is happening?
Several Australian Crop Breeders (ACB) Members have initiated grower audits of recent End Point Royalty (EPR) declarations to assess the accuracy of reporting and improve compliance.
The audits are being professionally conducted, with different approaches being taken by Members depending on resources, crop types, seasonal considerations and non-compliance impacts.
Why are the audits being done?
It is apparent across ACB’s Members that some Australian crop growers are not declaring their EPR obligation accurately or at all. This is generally done to avoid paying the applicable EPR back to the breeder that developed the variety (which is not always the same as the company the seed was purchased from).
These growers are receiving the benefit of varietal improvement but leaving their neighbours to pay for it.
Most current open pollenated crop varieties (such as wheat and barley) in Australia are protected by Plant Breeder’s Rights (PBR). It is the way that the breeder’s intellectual property is protected and governed within a commercialisation process.
The EPR is the way grower pays for the Licencing Rights when producing and harvesting a variety. It is a legal requirement under the PRB Act 1994.
Should I be worried?
If you have done the right thing you have nothing to worry about.
If you’ve made a genuine mistake, we will work with you to rectify and bring your EPR obligation up to date.
Where growers are found to have deliberately mis-declared the EPR obligation, or they don’t wish to cooperate with the Audit process, the relevant breeding company will look to enforce its legal rights in accordance with the Grower Variety Licence
While there are serious penalties for non-compliance, these will be applied as a last resort. We want to see all growers fulfill their obligations and comply according to their requirement under the Act.
Why now? What’s changed to mean you need to conduct Audits?
While breeding companies have always checked EPR Declarations and followed up growers they believe may not be accurately reporting, the scale of the issue is such that a formal Audit process has been initiated.
Reporting compliance in the Eastern States in particular has slipped significantly, with estimated wheat EPR compliance down to 46% in Queensland and 74% in New South Wales for the 2021 harvest.
This lack of compliance and proper EPR payment could mean that breeding companies cannot justify the development of varieties for these regions, instead redirecting resources to other regions.
Compliance audits are commonplace in other Australian agricultural sectors, such as fruit production and the cotton industry. With such poor compliance across increasingly large broadacre cropping areas, it is clear that a formal checking process must be in place to ensure the EPR value capture model is protected for the sustainable future of the Australian grains sector.
When will the audits start?
Some ACB Members started audits in late November 2023, continuing through the year with the exception of peak busy periods for grain growers.
Audits will not be conducted during harvest or planting / sowing. These are incredibly busy times of the year for growers, and we don’t want to interrupt or add more pressure while there’s time-critical crop work to be done. Growers that are contacted during this period in relation to Audits will have the option to delay the process.
EPR Audits will be planned as an ongoing, annual process as part of our ‘business as usual’ approach to ensure compliance.
Have audits been made before? Why haven’t you done this before?
Breeding companies have previously checked and followed up growers on an individual basis for inaccurate or missing EPR payments.
The current program is a sector-wide formalisation of these activities, with several ACB breeder Members actively and independently auditing growers they suspect of benefiting without contributing.
Why is it important to pay the EPR?
The EPR is the primary way crop breeding research and development is funded for the Australian grains sector. It can take up to 10 years to develop a new crop variety. ACB Members breed crops for local conditions, aimed at improving the adaptation, disease and yield attributes of our crops.
Do I need to pay EPR on grain fed to stock on my farm?
Yes, the EPR is payable on all production other than that which is retained for seed. This includes any volumes sold or used to feed stock.
Why do I have to pay EPR when I already pay a grain levy? Aren’t they the same thing? Aren’t you double dipping?
The EPR and the Grain Levy are two different things. Each has a separate legal basis with different mechanisms:
- The Grain Levy is a statutory requirement
- The EPR relates to Plant Breeder’s Rights
The Grain Levy funds RD&E activities related to agronomy, environmental challenges, pre-breeding (trait development) and policy.
The EPR funds the development of pre-breeding material into new varieties that can then be made available to Australian growers.
The development of these new varieties can take 8-10 years. The EPR is the primary way these activities are funded.
Why do I need to keep records of my crops and harvest? It’s hard to keep track, are they really necessary?
Keeping these records is important. We understand it can be difficult, but it is the grower’s responsibility to keep accurate records of any PBR variety you’ve grown.
As a farm business, certain record keeping standards are required. This includes tracking your PBR varieties and EPR obligations.
Where we can, we will work with growers and the industry to help make these processes as simple as possible. Where improvements are proposed, we will cooperate across the supply chain to support effective initiatives.
How are my declarations and payments reconciled? How are you checking up on what I’ve declared and paid?
Reconciling can be relatively simple. We take your declared tonnes by variety and deduct all volume where payments have been made through either grain trader auto deductions or invoiced directly to you.
This is then checked against our other records and expectation based on sales, area and other appropriate data sources. These are accessed in accordance with relevant Privacy legislation requirements.
What if I have made a rounding error? How accurate do my Harvest Declarations need to be?
We know it can be difficult to track your grain movements and varieties at harvest, and that rounding happens.
As a rule of thumb, we look for declaration accuracy that’s within a range of +/- 5% of the actual harvest volumes.
Why wasn’t the EPR deducted when I delivered by grain to the warehouse?
Bulk handlers are not grain buyers. The EPR payment is only triggered when sold.
As such, if the grain is delivered to a handling facility but there is no subsequent sale, no EPR has been deducted at this point. The EPR payment is only triggered when it is sold.
Not all grain buyers auto deduct EPRs on behalf of the grower, which means the grower may still owe EPR on the warehoused grain when sold.
Growers should check is a trader is auto deducting, and are recommended to use those that do.
In the Eastern States, bulk handlers include GrainCorp, Emerald Grain, GrainFlow and CHS Broadbent.
How far back are you investigating / Auditing? How many years / seasons?
Most of our Members are checking EPR reporting compliance for the past 2-3 years.
Generally, if you have done the right thing you have nothing to worry about. If you’ve made a genuine mistake, we will work with you to rectify and bring your EPR obligation up to date.
How can I check my current information? My past Declarations?
Grower can contact the National Grower Register for assistance. They can also contact the Royalty Manager at the relevant breeding organisation.
All these contact details, as well as the relevant EPR rate for a variety in any given year, can be found on the Variety Central website: https://varietycentral.com.au/
I don’t have a variety license so why do I need to pay EPR?
Most open pollinated crop varieties available to Australian grain growers are protected by Plant Breeder’s Rights (PBR).
Varieties with PBR protection require permission from the PBR owner to use their protected propagating material such as germplasm. The Grower Variety License is a document that facilitates this permission.
Growing a PBR protected variety without a license to do so is an infringement of the of PBR owner’s rights in breach of the Plant Breeder’s Right Act 1994 (Cth) (PBR Act).
Varieties have been released under the PBR Act since 1994. There is high awareness of this obligation throughout the industry.
I took up a variety capable of delivering top quality grain. Why should I pay the full EPR if this quality isn’t met?
Ultimately, EPR payment is a legal requirement, but the way it is structured means that growers and breeders share risk and reward.
Breeders can manage the genetic makeup of a variety, but not the seasonal growing environment in a particular year.
Our commitment is that – genetically – our material can deliver a performance result given a suitable environment. The seasonal result for a variety is a function of genetics x environment.
Breeders develop varieties that have the genetic capability to deliver on yield, disease tolerance and grain quality parameters in specific growing regions. We try to make our varieties as robust as possible, however, the extremes in Australia’s environment can impact a variety’s seasonal performance.
We also ensure that the EPR rate is relatively low: a cost of approximately 1% per hectare relative to crop revenue.
Are EPRs a fair way to pay for plant breeding? Is there a better way?
Globally, the Australian EPR system is one of the fairest for growers, breeders and the overall sustainability of our grains sector.
EPRs are charged on a production basis, rather than a set fee. Accordingly, the amount growers pay is relative to yield: pay less in a poor year, and if nothing harvested, nothing is paid.
By aligning EPRs to crop performance, when varieties are superior quality and high yield, both the grower and plant breeder benefit.
The EPR is paid after harvest, usually when the grain is sold or payments have been reconciled.
Almost all of the value created by higher yield varieties goes back to growers, who benefit directly from increased production.
If the EPR value capture model in Australia fails, the financial returns to plant breeders will be insufficient to develop new high yield, superior quality varieties for growers. There is currently no alternate funding model.